In the Spring Budget 2024, the Government announced that it will abolish the furnished holiday lettings (FHL) tax regime. The draft legislation is yet to be published; however the proposed changes which have been announced to-date include the following: 

 

• For taxpayers with furnished holiday lettings, mortgage interest and finance costs will no longer be fully tax-deductible. Basic rate tax relief will be available only (at 20%) as furnished holiday lets are to be treated in the same way as any other rental property. 

 

• Capital gains tax on sale: Currently, FHL’s are generally taxed at 10% on any gain when the property is sold, as long as certain conditions are met. Under the new rules, they will be taxed in the same way as any other property disposal, therefore 18% for basic rate taxpayers and 24% for higher rate taxpayers. If you are thinking of selling the property in the near future, it would be worthwhile considering if the property should be sold before 5th April next year to take advantage of the tax saving. 

 

• Fixtures & fittings: Any pieces purchased for the furnished holiday let currently qualify for 100% Capital allowances in the year of purchase, meaning that they are fully tax-deductible against the profits of the business. Going forward, you will not be able to deduct the original costs of the furniture/white goods provided to tenants. Instead ‘replacement of domestic items relief’ allows for the replacement of said goods to be deducted (provided the replacement is also for use of the tenant). 

 

We will issue a further update once the legislation has been published.